'Cash for Clunkers' Suspended? Funds Already Running Out

July 31, 2009— -- Congressional leaders scrambled today to find a way to keep the wildly popular Cash for Clunkers program up and running after heavy demand threatened to dry up the $1 billion set aside for the initiative.

White House spokesman Robert Gibbs said Friday that for now, the program that gives cash vouchers to people who trade in their gaz guzzling cars, "is up and continuing to run."

Reps. Sander Levin, D-Mich., and Betty Sutton, D-Ohio. announced Friday they will introduce legislation to provide an additional $2 billion into the program, and hope to get it passed by the House today, the last day before the House August recess begins. The Senate remains in session through the end of next week.

The "Cash for Clunkers" program was designed to help the struggling auto industry by giving owners of old cars money toward the purchase of a new, more fuel-efficient vehicle. But now the program appears to be running out of gas. It looks as if the money to buy up used cars has already been used up.

The White House announced late Thursday it was reviewing the program, denying earlier reports that "Cash for Clunkers" was being suspended. The conflicting announcements created confusion for buyers and car dealers alike.

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"Cash for Clunkers" was supposed to continue through Nov. 1, 2009, or until the money ran out. But with the number of dealers participating, if each completed just a dozen cash for clunkers deals, the $1 billion would be spent. And some dealers have initiated more like 250 "Cash for Clunkers" deals -- 20 times what the government was expecting.

At Fitzgerald Toyota in Gaithersburg, Md., it's a different kind of car race as the sales staff rushes to process "Cash for Clunkers" transactions before the government slams the brakes on the program.

"It was the right idea, but it was the cart before the horse," said Scott Addison of Fitzgerald Auto Mall.

Thursday evening the Department of Transportation told lawmakers it was suspending the "Cash for Clunkers" program at the stroke of midnight. But then later the White House said it was still working to find other options.

"We are working tonight to assess the situation facing what is obviously an incredibly popular program," Gibbs said of what officially is called the Car Allowance Rebate System. "Auto dealers and consumers should have confidence that all valid cars transactions that have taken place to date will be honored."

Confusion reigned. The official Web site http://www.cars.gov showed there was still $779 million left -- clearly not the case.But the Web site was still up and apparently running Friday morning.

Even "Cash for Clunkers" commercials are still running for a number of automakers.

Part of the problem? The government Web site dealers must use to enter clunker deals is a clunker itself, sputtering and stalling.

The computer crashes have caused a backlog: as many as 25,000 transactions that dealers have made but the government hasn't yet officially approved.

"They think they've given out this much, but there's a line this long trying to get in the door," said Addison.

Cash for Clunkers Deal Too Good to Pass Up

"It was too good of a deal to pass up," said Greg Burge, one of the estimated 250,000 consumers trying to take advantage of the program, which gives as much as $4,500 dollars for trading in a gas guzzler for a more efficient brand new vehicle.

"I was sort of afraid that all of the money would be gone before then, so when they called and said that it came in early I was really happy," said Greg's wife Lori Burge.

Now dealers are worried they'll be stuck holding the bag.

"It's up to the dealership now to get it's money back, and that's where the fear lies," Addison said. "Customers are on the road but now we're on the hook for the rebate."

Some customers now have to sign an agreement that they will give their new cars back if the government's funding falls through.

The big question now is whether Congress will allocate more money for the "Cash for Clunkers" program.

In a joint statement Thursday night, Sens. Dianne Feinstein, D-Calif., and Susan Collins, R-Maine, argued it might be possible to revive the program, but that new vehicles under the plan should face tougher standards.

"The extraordinary reaction to the 'Cash for Clunkers' program demonstrates that consumers do want to purchase more fuel efficient, less polluting vehicles," they said.

"We will insist than any extension of the program requires that the minimum fuel economy improvement for newly purchased vehicles be at least two miles per gallon higher than it is under the enacted clunkers program," they said. "It is also important to include lower-income consumers who are disadvantaged under the current program. So, we would also include a voucher for the purchase of fuel-efficient used vehicles."

'Cash for Clunkers' Guidelines

Here's how the "Cash for Clunkers" program worked:

People who owned a car made in 1984 or later that got 18 miles to the gallon or less could qualify.

The car had to have been registered and insured over the past year, and it must have been able to start.

If applicants to the program traded their clunker for a car that got four more miles per gallon, the government gave them $3,500.

If the new car got 10 miles more per gallon, the person got $4,500.

People trading an SUV, minivan or small pickup only had to improve their mileage by 2 to 5 miles per gallon.

The vehicle purchased had to be brand new and cost less than $45,000.

ABC News Z. Byron Wolf and Michael S. James contributed to this report.